Station Casino Bankruptcy Favors Insiders

As reported by the Las Vegas Review Journal, Boyd Gaming Court has refused to bid on any of the Station Casino assets in their upcoming auction, due to the court-approved process making it difficult to compete fairly.

Boyd's announcement came on the heels of Station Casinos agreement with their unsecured creditors to support a two-pronged Chapter 11 bankruptcy reorganization plan.

Keith Smith, Boyd's Gaming Chief Executive officer said, "Over the last 18 months, we have devoted significant resources in our attempt to acquire the ... assets of Station Casinos.  Unfortunately, given bidding procedures that favor Station insiders, and our current view of the limited potential value of the operating and development assets, we have concluded this opportunity no longer makes sense for our company."

U.S. Bankruptcy Judge Gregg Zive is placing the auction of 11 casinos, some land holdings and Indian gaming contracts, up for sale as one entity.

Frank Fertitta III and Lorenzo Fertitta, founders of Station Casinos and owners of Fertitta Gaming, has the stalking horse bid of $772 million.

A stalking horse bid is the initial bid on a bankrupt company's assets from an interested buyer chosen by the bankrupt company from a pool of bidders.

Smith claims that the "Texas Station put", will force an outside buyer to purchase the land under Texas Station for $75 million.  Fertitta Gaming wouldn't have to pay that though as Frank and Lorenzo Fertitta's mother, Victoria Fertitta, owns the land.

Other court-approved provisions, as stated by Smith, include Station Casinos transfer of assets from the casinos before their sale, customer lists and information technology infrastructure.  Employees and executives of the casinos can be hired away before the sale as well.

Smith stated, "Boyd Gaming remains committed to growth. However, we will only pursue transactions that are financially sound, fit well with our existing business, and offer attractive long-term returns for our shareholders.  Clearly, this opportunity no longer meets these criteria."

The bid by Fertitta Gaming has the support of Station Casinos main lenders, Deutsche Bank, JP Morgan and real estate investor Colony Capital.  The bid can encapsulate all or part of a $100 million investment from their unsecured creditors.

In a court hearing, the Station Casinos advisors and attorney stated that they were working to determine whether other companies that submitted letters of intent to bid on their properties were qualified.

Lazard Freres & Company confirmed that there were other bids submitted along with the stalking horse bid, but declined to say how many.

The second prong of the Station Casinos bankruptcy calls to reorganize the spin-off of four properties into a new holding company owned by Colony Capital, Deutsche Bank, JP Morgan and Fertitta Gaming.

When Boyd Gaming offered $950 million a year ago for 14 of the company's casinos, the offer was rejected.  Five months later, and $5.6 billion in debt, Station Casinos filed Chapter 11 bankruptcy.

Boyd Gaming was unsuccessful again in an offer of $2.45 billion for all of the Station Casinos after the bankruptcy case was announced.

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